1,720,973 research outputs found
Fiscal Policy in Nigeria: An Appraisal of the Increasing Role of Sub-National Governments
Get PDFThe conduct of economic policy is a shared responsibility of the three tiers of government in Nigeria with federal government having the largest share especially in the area of revenue generation, hence the role of state and local governments in the fiscal policy actions in the past are often disregarded. Analysts are, however, of the view that, in recent times, particularly with the entrenchment of democratic governance, the fiscal policy feats of sub-national government put together are becoming as important as that of federal government. This study therefore assesses the trend in the fiscal policy roles of the three tiers of government in Nigeria, to determine which is dominant; federal or state and local governments put together. The findings of the study indicate that, there is still a “centripetal” bias in the assignments of revenue powers without regard to expenditure responsibilities. The expenditure trends of the sub-national governments have surpassed that of federal government without a corresponding increase in their revenue powers, thereby makes them heavily dependent on federal government for revenue. It also finds an increasing trend in the fiscal deficit of sub-national government. The study suggests further divulgence of tax base in favour of sub-national governments or increase in their share of Federation Account as well as diversification of the nation’s revenue base so as to improve the revenue accruable to all tiers of government. Keywords: Fiscal policy, government, revenue, expenditure, budge
Financial soundness indicators and macroeconomic variables: an empirical investigation of the dynamic linkages
No full textThe Financial soundness indicators compiled for Nigeria within the context of IMFs Financial Sector Assessment Programme has been proven to be capable of pre-empting financial crisis. Analysts, however, considered it imperative to further explore the characteristics of the indicators, particularly their relationship with other macroeconomic variables to enhance the understanding of its dynamics so as to improve on its usefulness. This study, as a maiden attempt, applies Autoregressive Distributed Lag (ARDL) approach to investigate the dynamic linkages between the indicators and selected macroeconomic variables covering the period 2007 Q1 to 2015 Q4. The results indicate that macroeconomic events dictate the state of health of the Nigeria financial system. While changes in the level of economic activities inversely affect capital adequacy, it is directly related to asset quality and banks\u27 profitability. Asset quality deteriorates while inflation rises. Banks\u27 returns diminish and asset quality wanes as exchange rate depreciates. The study, therefore, suggests immediate deployment of FSIs as a monitoring instrument in conjunction with the existing micro-prudential tools while efforts should continue to improve the compilation process to enhance their accuracy
Let\u27s listen to Sarma: developing an index of financial inclusion for Nigeria.
No full textThe National Financial inclusion Strategy of the Central Bank of Nigeria was designed to reduce the percentage of adult Nigerians excluded from financial services from 46.3 per cent as at 2070 to 20.0 per cent by 2020. As a component of the policy tool kit, the strategy makes provision for annual data gathering to measure progress in financial inclusion drive of the Bank. This approach and others recognised by the CBN are mostly survey based, hence occasional and expensive. ln order to facilitate cross-country comparison, this study adopted Sarma (2008, 2012) to compute a composite index for financial inclusion for Nigeria from 2007Q7 to 2016Q2. The results indicate that financial inclusion effort of the CBN is yielding the desired result, particularly in term of penetration dimension. ln other words, there is increase in coverage with limited access to the services rendered by these institutions that could be of immense benefit to the customers. The study therefore, recommends that, CBN should not concentrates effort on reducing the percentage of adult Nigerians excluded from financial services alone, but also ensure that the customers benefit from financial services so as to enhance their participation in the developmental process. An inclusive financial system requires more thon the size of the banked population, it includes the availability of banks\u27 services (such as credit facilities) and relative ease with which the services can be accessed
Is monetary policy responsive to external reserves?: empirical evidences from Nigeria
No full textThe global economy has witnessed extraordinary boost in the accumulation of external reserves, following the Asian financial crisis of the 1990s. External reserves increased sharply from US10.0 trillion in January 2012. Developing countries increased their share from 30.0 per cent in 1990 to 67.0 per cent in 2011. Nigeria is not left out in this trend, as external reserves grew from US34.68 billion in March 2012, representing over 530 per cent increase within the period. This placed Nigeria as the 44th largest reserves holder in the world. Reflecting on this phenomenal increase in Nigeria’s reserves, that places Nigeria in such a strategic position, there is the need to examine, if the Central Bank of Nigeria considers the changes in the level of reserves, in its monetary policy decision making. The study applied an Autoregressive Distributed Lag (ARDL) approach to an extended version of the Taylor-type rule to estimate the monetary policy reaction function for Nigeria, with emphasis on external reserves. The results show that the Central Bank of Nigeria reacts to changes in the level of external reserves and exchange rate, in addition to output gap, thereby rendering the cogent conventional Taylor rule inadequate to assess the monetary policy reaction function of the Central Bank of Nigeria. This justifies the modification of the rule to incorporate other variables in addition to inflation and output to capture the reaction of monetary policy to developments in the economy. The study also validates the interest rate smoothing behavior, showing that the Central Bank of Nigeria is concerned with costs associated with interest rate variability
Nigeria’s Potential Growth and Output Gap: Application of Different Econometrics Filters
Get PDFThe concept of potential output and the corresponding output gap had received considerable attention by both policy makers and academic researchers, particularly in the developed countries. This is a reflection of not only its theoretical significance, but also its policy relevance. Output gap is used to model price and wage inflation, in estimating fiscal balance and the impact of structural reforms on the economy, hence an important indicator of fiscal policy trust. Most importantly, to a central banker it is critical in modelling monetary policy decision making process, as it serves as an input into central banks economic projections which forms an integral part of monetary policy decision and the setting of monetary policy rates. This paper measures the potential output and the corresponding output gap for Nigeria using Hodrick-Prescott filter, Baxter-King filter and both fixed and full length Christiano-Fitzgerald filters. The methods yielded different results, but with strong similarities in their evolution over time. According to all the methods, on the average, the economy was over heated during the early part of the sample period (2004:Q1 to 2005:Q4) but operated below capacity between 2008:Q1 and 2009:Q4. Interestingly, a fairly strong and stable relationship exists between inflation and the estimated output gaps. With this noticeable connection, using output gap to compliment expert judgement, in monetary policy decision making, would conceptually be a good decision. Keywords: Potential growth, output gap, econometric filtering, Nigeri
Monetary policy rule: A broad monetary conditions index for Nigeria
Get PDFTo determine the relative importance of both the domestic and external influences on monetary policy formulation, this paper constructs a broad monetary conditions index for Nigeria. It brings together the three key channels of monetary transmission, namely interest rate, exchange rate and credit channels. The result gives dominance to exchange rate channel, followed by credit channel and interest rate channel. The resultant monetary conditions index traces fairly well the policy direction of the Central Bank of Nigeria for the studied period, hence can serve as an adequate gauge of monetary policy stance of the Bank
A Post Market Reform Analysis of Monetary Conditions Index for Nigeria
Get PDFThe introduction of SAP and the accompanying financial market reform in 1986, witnessed a continuous decline of emphasis on direct monetary controls by the Central Bank of Nigeria (CBN) such that the Naira is allowed to freely float while trade and exchange controls were liberalized, market based interest rate policy was introduced and mandatory credit allocation was abolished to pave way for effective implementation of a market based system whereby the use of market forces is encouraged. This led to significant changes in the monetary policy framework of the CBN. However, while the post SAP monetary policy strategies, institutional framework and arrangements as well as instruments have been adequately given research attention, the monetary conditions arising from the adoption of these different strategies, framework and instruments have been largely ignored. The study applied a bounds testing approach to cointegration to estimate the weights of the variables in the broad monetary conditions index for Nigeria for the period 1989:Q1 to 2012:Q2. The result attached a higher weight to interest rate channel, followed by exchange rate channel and then credit channel, implying that interest rate channel is more important than the exchange rate and credit channel in determining the level of output in Nigeria. The resultant monetary conditions index traces fairly well the policy direction of the Central Bank of Nigeria for the studied period, hence can serve as an adequate gauge of monetary policy stance of the CBN. Keywords: Monetary policy, monetary conditions, monetary transmission, ARDL, cointegratio
Financial soundness indicators: the case of Nigeria
No full textThis paper adopted the concept as designed by the Fund to examine the soundness of the Nigeria Banking Sector from 3007Q1 to 20014Q4. From the result of the financial Soundness Indicators (FSIs) complied for Nigeria, it is obvious that the indicators can serve as reliable and consistent tools, capable of detecting vulnerabilities in the system. The study, therefore, recommends that adequate attention be paid to the indicators by the Central Bank. The Bank is urged to strive to gain full understanding of the concept as well as design additional framework for using the indicators so as to enable her take bold and proactive policy measures capable of entrenching discipline and corporate governance in the system so as to avert impending crisis or drastically reduce the potential impact of the crisis on the economy
Determinants of foreign reserves in Nigeria: An autoregressive distributed lag approach
Get PDFOn global scale, central banks' holdings of foreign reserves have escalated sharply in recent years. World international reserves holdings have risen significantly from US10.0 trillion in June 2011. Dominant among these reserves are concentrated in the hands of few countries. Ten major holders of foreign reserves are mostly from Asia. Oil exporting countries in Africa and the Middle East are not left out in this trend. Nigeria's foreign reserves rose from US62.40 billion in July 2008, making Nigeria the twenty-fourth largest reserves holder in the world. This pace of reserves accumulation is occurring without regard to its diminishing marginal benefits and rising marginal costs. This study used an Autoregressive Distributed Lag (ARDL) approach to run a slightly modified econometrics "Buffer Stock Model" of Frenkel and Jovanovic (1981) to estimate the determinants of foreign reserves in Nigeria with focus on income, monetary policy rate, imports and exchange rate. The results debunked the existence of buffer stock model for reserves accumulation and provide strong evidence in support of income as the major determinant of reserves holdings in Nigeria
Determinants of Foreign Reserves in Nigeria: An Autoregressive Distributed Lag Approach
No full textOn global scale, central banks’ holdings of foreign reserves have escalated sharply in recent years. World international reserves holdings have risen significantly from US10.0 trillion in June 2011. Dominant among these reserves are concentrated in the hands of few countries. Ten major holders of foreign reserves are mostly from Asia. Oil exporting countries in Africa and the Middle East are not left out in this trend. Nigeria’s foreign reserves rose from US62.40 billion in July 2008, making Nigeria the twenty-fourth largest reserves holder in the world. This pace of reserves accumulation is occurring without regard to its diminishing marginal benefits and rising marginal costs. This study used an Autoregressive Distributed Lag (ARDL) approach to run a slightly modified econometrics ‘Buffer Stock Model’ of Frenkel and Jovanovic (1981) to estimate the determinants of foreign reserves in Nigeria with focus on income, monetary policy rate, imports and exchange rate. The results debunked the existence of buffer stock model for reserves accumulation and provide strong evidence in support of income as the major determinant of reserves holdings in Nigeria
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